In this article Jasay argues that the forced “harmonization” of tax laws in Europe will remove an important source of inter-state competition. In the absence of such “harmonization,” capital and labor would move to the less regulated, lower taxed, more business-friendly countries (such as Britain, Ireland, Slovakia, and other new members of the EU) and away from the heavily regulated and heavily taxed “core states” like France and Germany. The loss or even potential loss of this labor and capital would thus act as a check or balance on high taxing nations. Tax “harmonization” would remove the incentive for states to limit their rate of taxation in order to keep businesses from leaving.

A number of historians (E.L. Jones, The European Miracle; Nathan Rosenberg and L.E. Birdzell, How the West Grew Rich; and Harold J. Berman, Law and Revolution) have observed that it was precisely such competition between states over tax rates, regulation of commerce, and even entire legal systems which helped trigger the commercial and industrial revolutions in Europe. In other parts of the world, where unitary Empires and not rivalrous states were the norm, such economic transformation did not take place. It seems that the new “federal” Europe is on its way to becoming another Empire.

The cuneiform inscription in the Liberty Fund logo is the earliest-known written appearance of
the word “freedom” (amagi), or “liberty.” It is taken from a clay document written
about 2300 B.C. in the Sumerian city-state of Lagash.